Having lumber orders to fill and not enough inventory on the ground may sound like a dream to LBM dealers right now. But that day may arrive sometime in 2015, according to a forecast by Henry Spelter, an economist with Forest Economic Advisors. Reduced capacity, increased demand from China, the pine beetle infestation in Western Canada and other factors will combine to raise the prices of softwood lumber as supplies tighten.
“The crunch is more likely to come after the [housing] recovery,” said Spelter, who recently retired as an economist for the Forest Products Lab of the USDA Forest Service. While closed mills are pretty typical during a downturn, Spelter pointed out that this time around, “It wasn’t just the smaller mills. Many of the larger mills have also been closed. So we’re [permanently] shrinking capacity.”
Shipments of U.S. softwood lumber are down by 41%, or 4 billion ft., Spelter said. Eastern Canada has reduced its capacity by 5 billion ft. since the housing slowdown, and Western Canada has shrunk its output by 3.5 billion ft.
The situation in British Columbia is complicated by several factors, including U.S. tariffs, which may make China a more attractive market. B.C. mills used to send 70% of their output to the United States, but that number has been reduced to 50%, according to Spelter.
And then there’s the pine beetle. While the “beetle kill” has peaked and loggers are now salvaging what’s left, the shelf life of dead trees remains unknown. With British Columbia accounting for 20% of North American lumber supply, there’s bound to be a ripple effect on pricing by 2015, Spelter said.
Taking the long view, Spelter looked into a future where housing starts are once again at 1.5 million units—with 20% less lumber available. “That’s when the crunch will come,” he said.
WELCOME TO THE SUMMIT
More than 170 people attended the ProDealer Industry Summit in Orlando, Fla., last month. Vendors rubbed elbows with executives from ProBuild, Stock Building Supply, Builders FirstSource, BMC Select, Do it Best, Orgill, LMC and dozens of independent dealers.
The educational program was also a big draw, opening with a housing forecast from National Association of Home Builders economist David Crowe and ending with a coast-to-coast survey of November’s House and Senate races by Michael O’Brien, p